SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (May 18, 2005):
Diversified Realty, Inc.
(Exact name of small business issuer as specified in
its charter)
Commission file number 0-2864
Montana 81-0268110
(State of Incorporation)(IRS Employer Identification
Number)
128 Second Street South, Great Falls, Montana 59405
(Address of Principal Executive Offices)
(406) 727-2600
(Issuer's telephone number including area code)
ITEM 4.01 CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Anderson ZurMuehlen & Co., P.C. , the Company's independent
registered public accounting firm, resigned on April 22,
2005 and ceased its client-auditor relationship for all
reporting dates after January 1, 2005.
Anderson ZurMuehlen & Co., P.C. reports on the Company's
financial statements as of and for the year ended
December 31, 2003 contained no adverse opinion or a
disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles.
During the 2004 audit, our registered independent accounting
firm felt that the Company did not maintain certain
supporting documents, and felt that the Company's internal
control was not adequate. Anderson ZurMuehlen & Co.,
P.C. 's report contained a disclaimer of opinion, based on
the following items discovered during the 2004 audit:
*Lack of Board of Directors involvement and oversight of
the Company,
*Lack of internal controls regarding adequate to provide
safeguards over Company assets to assure proper recording
of transactions, and
*Lack of supporting documentation for related to
transactions with its customers and suppliers.
Since, in the opinion of Anderson ZurMuehlen & Co., P.C.,
the Company did not maintain certain accounting records
and supporting documents or have adequate internal control
during 2004, Anderson ZurMuehlen & Co., P.C. did not apply
other auditing procedures to satisfy themselves as to the
extent to which the financial statements were affected by
these matters, the scope of their work was not sufficient
to enable them to express, and they did not express, an
opinion on the 2004 financial statements.
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The 2004 10-QSB's were missing original signatures. The
Company mailed signature pages to each member of the Board
of Directors and to the President, CEO and CFO along with
10-QSB's for each quarter of 2004, requesting that the
10-QSB's be reviewed and the signature pages be signed
and returned with their prospective original signatures.
All reports prepared for filing now include original
signatures. Original signatures are on file for the
8-K filed in April 2005 and for this 8-K/A.
The Company's policies and procedures by which expenses
are reimbursed to employees has been revised to require
receipts. The missing documentation was mainly in travel
allowances written to petty cash for travel expenses for
which the receipts were not turned in. While in the
Company's opinion, the $2,750 in checks written to petty
cash during 2004 represent legitimate travel expenses,
the Company has voluntarily reclassified as "due from
shareholder" and were reimbursed to the Company in full
by April 2005. ($500 occurred in 1st quarter, $250 in
2nd quarter, $750 in third quarter, and $1,250 in 4th
quarter of 2004) The Company did not and does not
intend to restate the prior periods, due to the fact
that the 4th quarter has not been reported yet, and the
total of the first three quarters disallowed expenses
was only $1,500, far less than 1% of the pre-tax income.
During 2004 and prior years, the Company paid certain
charges on credit cards without requiring detailed
receipts supporting the validity of the expense as a
business expense. The Company relied on the CEO to
identify each charge, the Company or individual
responsible for the expense and the appropriate expense
account. The Company has no reason to believe that
these charges were not business related. This procedure
has changed for 2005. The CEO now pays all credit cards
from his personal bank account, and turns in expense
reports with attached receipts and the business
purpose prior to the Company reimbursing such expenses.
The Company's management does not believe there was any
personal use of rental properties in Diversified Realty,
Inc. The Company owned, and in 2004 sold investment
property in Clearwater, Florida. This property was
visited during the year by the CEO for approximately one
week for purposes of readying the condominium for the
possible sale.
A related party, who is a licensed attorney was paid
$7,000 for legal fees on April 1, 2004. The Company
has obtained a copy of the supporting invoice for
services.
For the majority of fiscal year 2004 the Company's
parent, had four employees in their Great Falls,
Montana accounting office. Two fulltime accountants,
one fulltime bookkeeper and one fulltime secretary
contributed to the work load and separation of duties.
The Company and its parent also had a rental property
manager and a secretary in the Billings, Montana
office, where the majority of its rental properties
are located. The Company has been advertising to hire
another person in the accounting department. The Chief
Executive Officer of the Company has conducted several
interviews and is finding it tremendously difficult to
find potential employees with SEC experience and
accounting knowledge. The Company has engaged the
services of a CPA to bolster its accounting staff.
The Company and its parent are seeking additional
qualified, professional accounting staff to strengthen
its accounting department.
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The Company feels it is addressing and correcting the
inadequacies cited by their independent public accounting
firm. The financial statements included in the 10KSB and
annual reports to shareholders for the year ending
December 31, 2004 have been adjusted by reducing net
income by the amount of known non-accountable expenses.
The Company has located or is in the process of locating
missing documentation, is seeking additional personnel,
and is moving forward to correct internal control issues.
The Company is currently searching to engage a new auditor
to audit the revised 2004 financial statements, and issue
an opinion.
A Board of Directors meeting is being scheduled within
the upcoming week to establish regularly scheduled board
meetings, discuss the possibility of adding additional
independent directors, discuss the possibility of forming
an audit committee, and to discuss the progress of
procedural changes regarding the issues cited in the
Material Weakness letter received from Anderson
ZurMuehlen & Co., P.C.
During the years ended December 31, 2004 and December 31,
2003, and through the resignation date, there have been
no disagreements with Anderson ZurMuehlen & Co., P.C., on
any matter of accounting principles or practices,
financial statement disclosure or auditing scope or
procedure. A letter of consent from Anderson ZurMuehlen
& Co., P.C. is attached as Exhibit 16. During the years
ended December 31, 2004 and December 31, 2003 and through
the date of this Form 8-K/A, there have been no
reportable events (as defined in Regulation S-K Item
304(a)(1)(v).
ITEM 9.01: FINANCIAL STATEMENTS AND EXHIBITS.
(a ). Not applicable
(b ). Not applicable
(c ). Exhibits
Exhibit 16. Consent Letter from Anderson ZurMuehlen &
Co., P.C. dated May 18, 2005, is attached
to this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto
duly authorized.
Diversified Realty, Inc.
Dated: May 18, 2005 By: /s/ R. Bruce Robson
R. Bruce Robson
Its: President
INDEX TO EXHIBITS
Number Description
16 Consent Letter from Anderson ZurMuehlen & Co.,
P.C. dated May 18, 2005.
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EXHIBIT 16
[ANDERSON ZURMUEHLEN & CO., P.C. LETTERHEAD]
AZ & COMPANY [LOGO]
DISCOVERY BLOCK
828 GREAT NORTHERN BOULEVARD
P.O. BOX 1040 HELENA, MT 59624-1040
May 18, 2005
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We have read the amended Form 8-K/A, item 4.01, for
Diversified Realty, Inc.. (SEC File No. 0-2864) dated
May 18, 2005, and we agree with the revised disclosure
statements made therein concerning our resignation.
Sincerely,
/s/ Anderson ZurMuehlen & Co., P.C.
Anderson ZurMuehlen & Co., P.C.
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